Archive for the ‘graph of the day’ Category

The Household Labour Force Survey Survey report of the December 2011 Quarter released last week revealed that our unemployment rate slipped slightly to 6.3% from 6.6%. While a rate of 6.3% in itself doesn’t necessarily mean we have reached crisis levels, the focus on the overall unemployment rate does conceal detail about our employment situation that if brought to the surface will shine light on what I believe is an immiment crisis looming in our economic horizon.

Since JohnKey’s National took office in November 2008, 53,000 New Zealanders have joined the unemployment ranks. That’s a 54% increase in the number of people unemployed to a total of 150,000. For these people, National’s promise of a ‘brighter future’ has utterly failed to materialise, especially if you have a mortgage and teenage children you are supporting through school.

While the impact of the recession cannot be ignored, the number of people unemployed has actually increased since the recession officially ended in mid-2009. The official unemployment figures only tell part of the story. Many more people are without work but are not counted as being unemployed. Many are described by the Salvation Army as being “discouraged unemployed”. They would like to work and would accept a job offer if given, but they would not be deemed as actively seeking work because for instance looking for work through a newspaper does not meet the threshold of “actively seeking work”. The number of Kiwis jobless has increased by almost 100,000 under National’s watch to now 261,300 people as of December 2011. In the meantime 59,964 people are receiving the Unemployment Benefit as at December 2011 a fall of 7% from 67,084 as of the December 2010.
So is this it? Is this the brighter future promised to all New Zealanders?

This graph takes a slightly different bent to the others. National says that, if we re-elect them, they will sell 49% of our energy companies and about a third of our shares in AirNZ.

They claim this would bring in $5-$7 billion in revenue for the Crown but they have been unable to answer some crucial questions:

Why should Kiwis have to pay again to buy what they already own?

What would stop the shares going to offshore owners like in the past?

How much would the government lose in future dividends that we use to pay for schools and hospitals?

We can take a stab at answering the final question with projections and modelling but here’s a simpler question: what would have we lost if we had carried out National’s current privatisation plan in 1999? What if we has sold 49% of Meridian, Mighty River, Genesis, and Solid Energy?

Using the historical data on dividends, equity values, and borrowing costs, we can see the net result after 12 years.

Privatisation delivers some money up front but the long-term costs go on forever. Only a vote for Labour can stop asset sales.

Last year, wages rose just 1.9% while inflation was 5.3%. What do you get when you have higher unemployment and lower real wages? Falling incomes. This is where the effect of the smaller economy we saw at the start of this series is felt by Kiwis.

It’s worth noting that the median (middle) income has fallen by more than the amount of economic output per person and that groups on lower incomes have seen even bigger falls. That means that some people must be not feeling the pain as much as the rest of us, or even getting wealthier. It’s pretty obvious who are the few doing alright.

National’s tax cuts only made this worse. The CTU has crunched the numbers and reckons that the take-home pay gap between someone on $30,000 a year and someone on $150,000 a year has widened by $135 a week due to the government’s decisions.

Labour is committed to getting this country working again and we are committed to lifting wages through our work and wages policy.

Fewer jobs means more people on the dole and more officially unemployed (not everyone who is unemployed can get the dole).

The figures for youth, Maori, and Pasifika are just terrible. It’s always those at the bottom who get hit the hardest. The really awful thing is that National won’t even acknowledge this problem that has developed under their watch.

Labour is committed to better training through our skills policy, and getting more capital into businesses to grow and create jobs through our R&D policy and tax package.

So, we’ve looked at the performance of the economy and the government’s books under National, what about the effect on Kiwis’ lives. Labour believes that a job is core not only to our economic well-being but our dignity and sense of belonging in the community. That’s why we are so proud to have gotten unemployment below 4% and kept it there for four years, despite Bill English in 1999 calling our promise to get unemployment below 6% a “hoax”. National’s record is dismal:

Labour is committed to better training through our skills policy, and getting more capital into businesses to grow and create jobs through our R&D policy and tax package.

All the borrowing by National has worried the people who lend us money. They look at what’s called our Net International Investment Position, what New Zealanders own overseas and the money they’ve lent to foreigners minus what foreigners own here and what they’ve lent us.

This figure expanded rapidly during the housing boom as the banks borrowed cheap credit from overseas to lend to property investors here. And, to be fair, it has actually fallen slightly under National due to the decreased value of the assets foreigners own here during the recession, and the reinsurance payments our insurance companies are now due from offshore because of the earthquakes.

But, the government’s share of this net overseas debt has tripled, and the bailouts of South Canterbury Finance, Mediaworks, and AMI have warned people lending to the government that, with a flick of Bill English’s, private debt might become public debt under National. This has the lenders worried, as do the projections of our net international debt rising in every coming year and what Standard and Poor’s calls limited “fiscaland monetary policy flexibility” – ie. the government has already cut taxes too much to meet its spending plans and can’t afford another stimulus package if, as is looking likely, there’s another recession. That’s why they downgraded the government’s credit rating.

Labour has learned the lessons of the housing bubble. We need to remove the tax incentives that make people favour housing as an investment – it just leads to us running around buying houses from each other at ever-inflating prices using borrowed money. Our capital gains tax and savings policy will help to stop a repeat of the housing bubble and direct Kiwi savings towards productive enterprises. That will result in less borrowing from overseas and help to restore our credit rating, as well as paying to make the first $5,000 of every Kiwi’s income tax-free.

So, how did net government debt blow out by $38 billion in less than three years, after Labour worked for nine years to get it down to zero?

Record spending and record deficits.

It’s kind of ironic that National likes attack Labour as being a ‘borrow and spend party’ when we left government spending at the same proportion of GDP as we found it and paid debt down while they wanted to splurge the surpluses on funding inflation-fuelling shopping sprees for the well to do, and they have done exactly the opposite.

Only half of the 2011 deficit was due to the Christchurch earthquake costs. The bulk of the $38 billion National has borrowed has been for other reasons:

$2.5 billion a year in tax cuts to the wealthiest 10%

$1.5 billion more a year in benefit payments due to higher unemployment

$1 billion a year more in interest payments due to the higher debt

The recently released government financial statements show that Bill English’s ‘fiscally neutral’ 2010 tax package has actually resulted in $1.1 billion extra borrowing in its first nine months.

Yes, there always would have had to have been extra borrowing due to the recession and the earthquakes but National chose to pile extra debt on top of these necessary expenditures.

One of Labour’s policies is to cap the open-ended nature of the Key-English tax cuts. Right now, the larger your income, the bigger your tax cut. Most people got a few dollars a week that was eaten up by GST whereas the highest paid CEOs got tax cuts of hundreds of thousands a year. By re-introducing the 39% rate at $150,000, Labour will limit the size of those top-end tax cuts.

So, we’re poorer as a country after three years of National. Back in 2008, Key used to say we had a growth problem, not a debt problem. Now, we have both. Net government debt has increased a jaw dropping $38 billion under National.

The cost of the interest on this debt is now $10 million a day.

The size of this debt might be small by international levels, thanks to the last Labour government paying down net debt to zero despite National’s constant calls for tax cuts, but its rapid growth, as we’ll see in a later post was one of the major concerns of the ratings agencies when they gave the government a double downgrade.

Labour is committed to getting debt down. We have carefully designed our tax package to bring down debt further than National. By the end of the projection period, net government debt will be $10 billion better under Labour than it would under National.

National came to office promising to close the gap with Australia but, given how weak their economic record has been, that was never going to happen.

Bill English admitted in the House that the GDP per capita gap with Australia had widened but, oddly, when we asked him again the other week, he claimed it had narrowed. We’ve been unable to find any evidence to support his claim and you and I both know that the Australian economy has been much stronger than New Zealand’s under National. Maybe English, like Key, gets his information from anonymous emails…

Rightwing parties often say that Labour is obsessed with ‘dividing up the cake’ whereas they are about ‘growing the cake’ so there is more for all. The problem is that National, particularly this government, has an appalling record on economic growth. Far from ‘growing the cake’, they’ve shrunk it.

As we’ll see later in this series, the poor performance of the economy means it is failing on its main promises.

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These are the voices of Labour MPs on issues that we care about - and we'd like to hear what you think too. What you’ll read are the individual opinions of MPs. We won’t always agree with each other and sometimes our opinions may change.